Britain's leading share index fell sharply today as a series of political and economic crises around the world sent global markets running for cover.

The FTSE 100 Index dived by as much as 100 points before pulling back around half of the loss after data showed that the US economy added 209,000 jobs in July, its sixth straight month of growth above 200,000.

As the figure was still less than expected, it allayed fears on Wall Street that the Federal Reserve will soon raise interest rates to curb inflation.

However the Dow Jones Industrial Average was again lower after a dramatic fall yesterday in which it plunged 317 points, the biggest drop since February.

The earlier slump came as the West's tightening of sanctions against Russia raised fears of a fresh threat to Europe's economy and energy needs.

Further anxiety was stoked by Argentina being forced into a debt default and the deepening woes of Portugal's Espirito Santo bank.

In addition, a rash of poorly-received American corporate results, combined with the sense that a correction in the stock market was long overdue, pushed traders into sell-off mode.

In recent weeks, markets have appeared to be shrugging off escalating global tensions over Ukraine, Iraq and the Portuguese banking sector - with policy makers admitting they were baffled that they had not been more volatile.

The prospect of central banks in the US and the UK withdrawing stimulus in the form of low interest rates and money printing quantitative easing (QE) policies also seemed not to be bothering investors as it had done during last year.

Wall Street had seen five straight months of gains but trading screens turned red as July came to a close and investors banked profits.

The FTSE 100 reached a three-month low as it slumped below 6630 points.

It is a far cry from optimism at the start of the year that the index would break through the record close of 6930.2 - set during the dotcom boom in December 1999 - in 2014, and even reach as high as 7500. But it is now lower than January.

This is despite figures last week showing the UK economy continued to grow strongly, expanding by 0.8% in the second quarter to take gross domestic product (GDP) back above pre-crisis levels last seen at the start of 2008.

The performance of London's stocks, heavily exposed to global markets, tends to be more influenced by US and international trading currents.

On currency markets, the pound was also down today, dropping almost half a cent against the US dollar as a survey showed growth in Britain's manufacturing sector during July was its weakest for a year.